A file photo dated August 28, 1993 shows an Australian Collins class conventional powered submarine being lowered into the water at Port Adelaide. Photo: AFP

Opposition politicians and industry groups in Australia demanded clarity from the government Tuesday over reports that it could buy a new submarine fleet from Japan rather than build them at home.

Australia needs to replace its fleet of diesel and electric-powered subs, which date from the 1990s. Before the conservative government was elected last year, it said up to 12 new vessels would be constructed in South Australia, potentially with Japanese technology.

But The Australian newspaper on Tuesday reported that Japan is now the frontrunner to not only supply technology but build the subs as the cost in Australia would be too high.

It said that buying off-the-shelf from Japan, based on its highly regarded Soryu-class design, would cost about Aus$25 billion, compared with Aus$50 to $80 billion at home.

Industry Minister Ian Macfarlane insisted that "South Australia is certainly still in the mix" but declined to comment on whether the contract would go to Japan.

On Monday, Prime Minister Tony Abbott told reporters that "the most important thing is to get the best and most capable submarines at a reasonable price to the Australian taxpayer".

Labor opposition leader Bill Shorten said allowing the subs to be built elsewhere could "irresponsibly put our national security at risk as a maritime nation".

"Submarine and ship building is a strategic asset that we can't let wither and die," he said in a statement.

Abbott has courted Japan on security and trade matters since coming to power a year ago, describing their relationship as "special", as Asia adjusts to China's growing assertiveness in the region.

In July, Prime Minister Shinzo Abe became the first Japanese leader to make a bilateral visit to Australia since 2002, with closer defense cooperation high on the agenda.

Unions fear the purchase of submarines from overseas would deal a potentially fatal blow to naval shipbuilding in Australia with a ripple effect for associated industries.

"I think there will be thousands of jobs in the shipbuilding sector that will be put at risk," Australian Manufacturing Workers Union president Paul Bastian said.

The Australian Industry Group, a lobbying outfit, said that businesses had been relying on the government's previous undertakings.

"Industry would be looking for guidance as soon as possible from the government around what it should expect and what role it will be asked to play. The sooner we can get some clarity around that, the better," the group's chief executive Innes Willox told ABC radio.

A final decision is expected in the next defense white paper, due in June 2015.